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Macroeconomy

Macroeconomic performance across the Arab countries tend to diverge between major oil and natural gas exporting countries in the Gulf Cooperation Council (GCC) and other countries in the region. In recent years, heightened political uncertainties, instabilities, and violent conflicts have contributed to a more pronounced deterioration in macroeconomic performance in a handful of countries including Syria, Iraq, Yemen, and Libya. Between mid-2014 and early 2016, oil prices dropped by from USD 100 per barrel to USD 30 per barrel. [1] In tandem with the November 2016 OPEC agreement on limiting oil production to 32.5 million barrels per day [2] and that boosted the prices to USD 69 per barrel [3] in January 2018, the GCC countries undertook fiscal measures and reforms to cut public spending and boost non-oil revenues, including the adoption of the GCC Unified Agreement for Value Added Tax, introduced primarily in Saudi Arabia and the United Arab Emirates at a standard rate of 5% in early 2018. [4]

For the Arab region as a whole, GDP (Purchasing Power Parity, constant 2011 prices) leveled at Int$ 6,302.6 billion in 2016, constituting 5.6% of the Word’s GDP.[5] While GDP in Saudi Arabia reached Int$ 1,628.6 billion in 2016, the highest in the Arab region, it reached Int$ 1.1 billion in Comoros.[4] The Gross National Income (GNI) per capita (Purchasing Power Parity, current prices) of the Arab region averaged at Int$ 16,720 in 2016, with the highest value of Int$ 83,150 registered in Kuwait, and compared to a World average of Int$ 16,170 in 2016.[4] In terms of economic growth, the average GDP growth stagnated at around 3% between 2013 and 2016.[5] For the GCC countries, the drop in international oil prices has weighed on their economic outlook, with real GDP growth rate declining from 4.1% (2009-2014) to 0.5% in 2017.[6]

At the regional level, fiscal deficits have generally been increasing since 2009. Except for Kuwait, all the Arab countries registered a fiscal deficit in 2017, with the highest deficit recorded in Libya at 43% of GDP.[7,8] Lower oil prices have also resulted in large fiscal deficits in the GCC countries. However, with the implementation of fiscal consolidation measures and as the as oil revenues increased in 2017, the GCC fiscal deficits narrowed to 6.3% of GDP, down from 11.9% in 2016. [6] Over the same period, total government revenues, as a percentage of GDP, were the lowest in Somalia and Sudan at 3.6% and 9.8%, respectively, and the highest in Kuwait at 52.1%, while government expenditures, as a percentage of GDP, were the lowest in Sudan at 12.2% of GDP and highest in Libya at 85.4%.[7]

Financing of budget deficits linked to high and rigid expenditure commitments and the challenges of mobilizing additional revenues or reforming the tax structure have contributed to public debt accumulation, particularly in recent years. In 2017, 6 Arab countries registered a public debt-to-GDP ratio at above 77%.[7,9] Lebanon registered the highest value at 152.3% of GDP, followed by Egypt and Jordan (101.2% and 95.6% of GDP in 2017). [5] In the GCC countries, the gross public debt has also increased to 25.5% of GDP in 2017, up from 13.5% of GDP in 2015. [6] Additionally, most Arab countries witnessed a rise in their inflation rates increasing up to 7.8% in 2017, from 5.3% in 2016, with very high rates recorded in Libya (33%), Sudan (27%) and Egypt (24%).[6,7]

This overview has been drafted by the ADP team based on most available data as of 27 February 2018.

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